The Google tax – what it means ?

George Osborne announced a new tax in the autumn statement officially known as the ‘diverted profits tax’. The tax has been created as a way of trying to prevent aggressive tax aversion and is the first tax to suggest that the amount you pay should be determined by the volume of your sales as opposed to the profits. The tax is aimed at multinational companies with sales over £10 million, and may be subject to this tax regardless of whether the company is actually based in the UK or not. This is partially focused at technology companies such as google who pay little corporation tax as they shift profits to subsidiaries located aboard, and other technology giants such as Whatsapp who have no actually base/office in the UK. This is in an attempt to prevent companies exploiting countries where the tax rates are low or prevent companies using systems such as the ‘double Irish’.
As of the 1st April 2015, companies will be expected to review their own tax structure and report themselves if they think they may be liable. They will then have 30 days to pay 25% tax on the taxable profit they have avoided. The tax is expected to only raise around 20 million in 2015/2016 but rise to around £360 million by 2018 and an overall of £1billion by 2020. However with the UK being the first country to impose a tax such as this there is uncertainty about how effective it will be or the impact it will have on UK businesses.